What's the REAL unemployment rate?

I ask this because on CNN this morning someone mentioned the “real” unemployment rate was more like 14% instead of the official 7%. What did they mean?

The “real” unemployment rate adds those that are out of work but have given up looking for a job and the under-employed (those that would like full time employment, but only have part-time jobs).

My personal unemployment rate currently stands at 100%.

I’d also say the unemployment rate goes the other way though. There are some people among those laid off who had actually planned on retiring or leaving the workforce. They’re collecting unemployment and nominally searching for a job, but really should be considered out of the labor force.

Here’s a relevant link:


That’s a scary picture. I had no idea unemployment was measured in so many different ways but that we just don’t hear about the other official metrics.

Back a couple recessions ago when they wanted the number to look better they changed the definition to add the entire US military to the numerator of employed people, but still not counting them in the denominator of people looking for or eligible for work.

Viola, unemployment dropped about 1% overnight as 2 million people, including me, suddenly became both fully employed and ineligble to be counted as potential employees. Felt weird, like being in a Twilight Zone Episode.
Intellectual honesty is not one of the strong selling points of (un) employment figures.

A couple years ago, while things were still going more or less upwards, you’d often hear somebody crowing about 30,000 new jobs created last month under the President’s fine leadership. What wasn’t mentioned was that it took 80,000 new jobs each month just to break even with population growth including immigration.

So a “gain” of 30,000 was actually putting 50,000 more people out of work. Month after month throughout most of the last 8 years. Except in the months where the numbers numbers were worse, which they often were.

Now that a lot of low-end immigration has gone into reverse, I don’t know what the current breakeven number is. It might even be negative by 10-20K/mo. Meanwhile, job losses are up around 500K/mo.

One final factor not counted in here is people in depressed areas who continue to look for work but who have uised up their unemployment benefits. Once you stop drawing unemployment, you’re no longer deemed unemployed, even if the reason is that your eligibility has expired without finding work. This happened to me once quite a few years back (there were good reasons not to relocate at the time). Some more honest agencies attempt to adjust their figures for this, and it’s a small percentage of the population, but it does in fact exist.

This is GQ, we can do better than a blog post as a cite.

Here is an explanation of the unemployment rate is calculated:


From that cite, in contrast to what **Polycarp **posted: “Some people think that to get these figures on unemployment the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs. But some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed.”

In addition to the way that the basic unemployment rate can be misleading on the one end, it can also be misleading on the other end: even when times are great and everyone who wants job has one, the unemployment rate will not be 0% – there are always people intentionally taking breaks between jobs, or people who could take a lower-paying job but elect to keep looking for a better one, people who are leaving the workforce intentionally but who are still eligible to draw unemployment, etc. So when unemployment gets down to the low single digits, it’s not like we should be trying to get it lower.

Yes, the idea that one number answers for all of it is kind of a myth.

On a related note, many economists consider zero unemployment to be both unattainable and undesirable. It is similar to having a zero vacancy rate for rental accommodations – all sorts of problems arise. A little slack in the system is a good thing – as long as someone else is providing the slack, of course. :wink:

True, but the quoted official figure is what economists all over the country use, and it’s what governments (well the US anyway) use to guage policy.

Is it inaccurate, arguably, but deluding oneself (not directed to anyone in particular) to believe things are different one way or another is just an exercise in useless handwringing.

And, people want to full around with census?!?

The CPS has been around for a while and it is what the government uses even though it’s not perfect.

It doesn’t take a lot of insight to realize that the precise number of the stated unemployment isn’t the important bit. (And if you read the government’s Web site on how unemployment is calculated they’re quite hopen about the fact that the number is criticized as being simplistic.) What matters is the direction it’s going in. You may claim the unemployment figure understates the case, but there’s no mistaking the fact that if it starts ballooning, that’s probably very bad.

This is not true. The unemployment rate is not the number of people drawing unemployment benefits. It is the number of people looking for work who haven’t found work.

And as RickJay points out, the method of calculating the unemployment rate isn’t particularly important. What matters is being able to compare apples to apples. If the method for calculating unemployment was 5% last year and is now 9% it shows unemployment is getting worse. If you think the unemployment figure should include certain classes of people and that the “real” unemployment rate is higher than 9%, then the “real” unemployment rate wasn’t 5% back when the economy was booming.

Agreed. The government goals are based on the number that is used. If they want less than 5% unemployment, that 5% is based on the unemployment number they use. It’s not valid to say “the real number is double the number they use, so we’re nowhere near the goal”.